AUDIT REPORT : WESTERN HILLS ROAD (JAN-FEB 1979)

PROJ INITIATED IN 1969 TO CONSTRUCT ALL-WEATHER, 140 KM ROAD CONNECTING PLAINS TOWN OF DHANGHARI WITH ISOLATED HILL REGION AROUND DANDELDHURA. AUDITORS REVIEWED 10-YR ACCUMULATION OF DOCUMENTATION, MET WITH USAID & NEPALESE GOVT (HMG) OFFICIALS AND WITH US ENGINEERING-GEOLOGICAL CONSULTANT, AND MADE FIELD INSPECTION RIDE OVER COMPLETED SEGMENT OF ROAD. WHRP NOW SCHEDULED FOR6/79 COMPLETION. REPORT INDICTS PROJ FOR COST OVERRUNS & CONSTRUCTION DELAYS. ORIGINALLY PROJECTED AT 5 YRS & $10M EQUIVALENT COSTS,PROJ HAS ALREADY TAKEN 10 YRS & HAS COST AID 53.7M INDIAN RUPEES PLUS 87.5M NEPALESE RUPEES(FLUCTUATING EXCHANGE RATE MAKES DOLLAR COMPUTATION DIFFICULT). OF GREATEST CONCERN TO AUDITORS IS FACT THAT ROAD DOES NOT MEET ALL-WEATHER STANDARDS. US CONSULTANT HAS ESTIMATED UPGRADING TO COST ADDITIONAL $3M,TAKE ADDITIONAL 1 1/2-2 YRS. AUDITORS FAULT USAID FOR FAILURE TO EVEN TRY TO SOLVE PROBLEMS IDENTIFIED IN PREVIOUS AUDIT REPORTS. 1973 PP RECOMMENDED PROJ CONTINUATION,NOT FULLY ADDRESSING COST OVERRUNS & DELAYS. 1973 PRO/AG EMPHASIZED TRNG & INSTIT BUILDING AS NEW PARALLEL OBJS; THIS DOCUMENT USED AS RATIONALE FOR LIMITING OF USAID INVOLVEMENT & EXPANDED DEPARTMENT OF ROADS(DOR) SUPERVISORY ROLE. AUDITORS CHARGE LIMITED ECON BENEFITS OF ROUTE & ENSUING ENVIRONMENTAL PROBLEMS DUE TO FAILURE TO CONDUCT EITHER STANDARD ECON OR ENVIR STUDIES,AND NOTE HIGH POTENTIAL FOR FUTURE SELF-DESTRUCTION & FAILED AREAS DUE TO INADEQUATE ATTENTION TO DRAINAGE. DOR FAULTED BECAUSE OF INEXPERIENCE,LACK OF TECH CAPABILITY,AND INCONSISTENT HMG COMMITMENT. AUDITORS REC AID SUPPORT FOR UPGRADING BE LIMITED TO REMAINING $1.2M EQUIVALENT GRANT FUNDS TO BE DISBURSED ONLY UPON APPROVAL OF HMG-SUBMITTED COMPREHENSIVE WORK & MAINTENANCE PLANS;ALSO DIRECT HMG REIMBURSEMENT FOR UNAUTHORIZED USE OF PROJ RESOURCES. MISSION RESPONDS THAT PROBS CITED COMMON TO ALL NEPALESE ROADS;THAT AID AHEAD OF OTHER DONORS IN HELPING HMG ADDRESS ENVIR CONCERNS;WHRP HAS PROVIDED DOR TRAINED MANPOWER FOR NON-FOREIGN ASSISTED PROJS.